Question

Cynthia invests some money in a bank which pays

5% compound interest per year.
She wants it to be worth over £8000 at the end of 3
What is the smallest amount, to
years.
the nearest pound, she can invest?

Answer 1

Answer = £6911

Compound interest of 5% means multiplying by 1.05 each year.

Let’s call the missing value x

To find x, we need to do:

(X) * 1.05 * 1.05 * 1.05 = 8000

So, to find x, divide 8000 by 1.05^3